The Auditor-General's Report 2016 Series 1 was tabled in the parliament yesterday, 31 July.
It outlined 353 recommendations to help the federal government, federal statutory bodies, and state governments realign their priorities and rectify their mistakes.
According to a report by Bernama, two of the recommendations were related to the Federal Government Financial Statement 2016, 90 were for the federal government ministry and department activities, and 244 pertained to financial management of state government departments, agencies, and companies.
"As usual, the department heads concerned have been informed beforehand, for the purpose of confirmation," Auditor-General Tan Sri Dr Madinah Mohamad told Bernama.
A total of 25 ministries, 18 federal departments, 38 federal statutory bodies, 138 state ministries/departments, 41 state statutory bodies, 41 local authorities, and six Islamic Religious Councils were audited
63 performance audits were ran on government projects/activities/programmes and 21 management audits were conducted on government companies at federal and state levels.
187 out of the 307 ministries, federal departments and statutory bodies, state ministries/departments, state statutory bodies, local authorities, and Islamic Religious Councils received the 'excellence' (5-star) rating.
"25 ministries achieved excellence compared to 16 in 2015," added Auditor-General Dr Madinah.
1. The federal government incurred a deficit of RM38.4 billion in 2016
The ratio of the Gross Domestic Product (GDP) was at 3.12%.
The deficit was financed by internal and external loans amounting to RM99.85 billion to repay existing debts, finance the Housing Loan Trust Fund and development expenditure. Federal ministries and departments spent a total of RM41.99 billion from the allocated amount of RM43 billion.
According to the Series 1 of the 2016 Auditor General's Report, the final provision for operating expenditure in 2016 was RM212.3 billion. RM210.17 billion was spent from that amount.
Overall, the report stated that the performance of the federal departments showed an improvement compared to the previous couple of years, with 16 rated as 'excellent' and the remaining two as 'good' in 2016, reported Bernama.
2. A 2,132-day delay in the Rawang bypass construction led to the cost bloating 208.7% to RM628.14 million
The 23km road project which started in July 2005, was initially supposed to be completed by January 2008 at the cost of RM203.47 million, stated a report by Malaysiakini.
Soon after, the Extensions of Time (EOT) for 2,132 (five years, 10 months) was approved for the project, which led the contractor to claim losses and expenses amounting to RM7.88 million.
Two contracts were signed in March 2009 and December 2011.
In the first one, changes to the price of construction material were made. The contract cost was retained.
The second contract saw the addition of several other works including a 3.3km alternative road through Taman Warisan, a 2.64 elevated structure, and the upgrading work of 1.57km to an existing federal road. In total, the additional works cost RM390 million.
These additions were supposed to be completed 40 months from when the contract was signed in December 2011.
Based on the latest EOT, the project should have been completed by 16 March 2017, however, only 97.15% was completed by 15 February.
More factors that resulted in the increase of cost:
- The design changes in the overlapping routes between elevated structures with the Assam Jawa Taman Rimba Highway (LATAR) led to an additional cost of RM34.2 million.
- The delay in settling the compensation for land acquisition with a valid justification resulted in the payment of penalty which cost RM5.52 million.
Rawang Bypass is part of the 9th Malaysia Plan which links the road network between Kuala Lumpur and Rawang.
3. The mistakes by the consultants involved in the construction of Phase Two of the obstetrics complex at Tengku Ampuan Rahimah Hospital (HTAR), Klang, cost the government an extra RM17.2 million
Malay Mail Online (MMO) reported the Auditor-General as saying that the contractor, Pembinaan Sujaman Sdn. Bhd., was forced to apply for 36 variation orders and five measurement work which led to an additional cost of RM16.23 million and RM1.01 million, respectively.
The AG report mentioned that the Public Works Department (PWD) also failed to supervise this construction project and take actions against the consultants.
The mistakes by the consultants and PWD led to a 333-day delay and additional consultancy services which cost the government RM1 million.
The second phase was meant to upgrade the obstetrics and neo-natal services, reduce patient congestion, and enhance existing infrastructure.
The approved cost of the project was RM180 million, including the cost of medical equipment at RM30 million.
4. Rumah Iskandar Malaysia (RIM)'s failure to achieve its targets led to a loss of rental income at RM3.52 million
It was reported that the Prisma Harta Sdn Bhd (PHSB) was in charge of assisting its parent company, Iskandar Region Development Authority (IRDA) with the operation and maintenance of the the rental-based housing scheme, Rumah Iskandar Malaysia (RIM) Project in Bandar Nusajaya, Johor.
Specifically, PHSB was supposed to manage the rental of 1,500 RIM houses, ensuring that it is at an affordable rate to people from low and middle income groups. They were also supposed to manage the rental for 13 commercial units.
PHSB did manage the rental of the RIM and commercial units well, but it did not meet its intended targets.
"For these three years, the rental of housing units recorded between 70.5% and 80.5% only, whereas the rental of commercial units was between 61.5% and 84.6%. The rental income for housing units in year 2013 was at the lowest of 72.8%," reported MMO.
"Based on the PHSB Rental Debtors Aging Report as of 31 December 2015, the arrears of housing and commercial rental for three months and above were high which was RM762,580 (64.1%) compared to the total arrears in rental debtors amounting to RM1.19 million," explained the report.
PHSB has been asked to review the rental rates for the commercial units which is currently at RM3.08 and RM8.08 per square feet, as the average rental rate from the Valuation and Property Services Department Johor Bahru earlier this year states that the rate for the three areas near RIM (Taman Nusa Sentral, Taman Nusa Idaman, and Taman Nusantara) was only RM2.27 per square feet.
5. The National Entrepreneurial Group Economic Fund (Tekun) accumulated losses worth RM209.28 million as of 2015 due to debts
The losses incurred were mainly due to large amounts of debts to the government and bad debts written off by Tekun, reported New Straits Times (NST).
The total amount of bad debts which were written off were RM410.61 million (9.6%) from total financing and collected repayments were only RM74.63 million (18.2%).
The AG report also revealed that while Tekun's management was in line with the objective of the corporation, it was, however, not properly planned.
"The corporate governance practices are also less than satisfactory," said the report.
The audits conducted between May to October 2016 and February 2017 revealed that detailed studies were not carried out to evaluate the effectiveness of fund utilisation by entrepreneurs who are starting or expanding their businesses.
"Failure in the implementation of Tekun Entrepreneurship Portal, Tekun Entrepreneur Community Card, and Cyber Mall resulted in losses of RM872,035 and members of the Audit, Integrity and Risk Committee did not have accounting background," read the report.
6. The Malaysian Immigration System (myIMMs) failed to blacklist deported immigrants
Calling the department's management of immigrant deportation as "less than satisfactory", the AG report said that their failure to blacklist the immigrants could result in them being able to return to Malaysia.
NST also reported that the numbers of those deported registered in myIMMs differs with those recorded by the department's enforcement division.
"The number of removed immigrants between myIMMs and the department’s enforcement division headquarters differed by 155,813. Furthermore, they were not blacklisted and updated into the suspects list in the system," read the report.
The report also revealed problems with the contracts of the ferry service used to deport the immigrants.
"Ferry service contracts were renewed four times with the same company from 2007 to 2017. Yet, there was no travel insurance coverage for the immigrants until 2015," said the report.
The AG report also commented on the management of the depot services which was only described as "satisfactory".
"The audit carried out between November last year and January this year also found that controlled documents in the deportation transit centre were poorly managed because they were handled by contractors.
"The appointed caterers also failed to provide meals according to specified menus in the contract and there was no quarantine room at the detention depot while others were poorly managed," explained the report.
A total of 265,550 immigrants from various countries were deported between 2014 and 2016 and a majority of them were Indonesians, (75,580). It cost the government RM95.24 million for the detention and removal process.
7. The Perlis Social Welfare Department continued paying monthly aid to deceased people
According to Free Malaysia Today (FMT), the AG report stated that 32 deceased recipients who passed away in 2015 and 2016 received the welfare aid that totalled up to RM20,610.
"This happened because the heirs did not inform (the department) about the deaths, and the department did not stop giving the payments even though the information could have been given through the myIDENTITY system," read the report.
myIDENTITY is a government system that allows Malaysians to update their personal information details.
The AG report has rated the record management and information on recipients as "not satisfactory" and it said that the information the department received on the personal details through myIDENTITY was not used immediately to stop the payments.
It was reported that the Perlis welfare department had also given monthly aid to a foreigner with permanent residency status.
"The person was approved to receive general aid of RM100 per month on 14 November 2002. This happened because the department did not investigate properly when approving the aid application," explained the report.
The general aid for Malaysians are given monthly to registered families whose income does not exceed the poverty line of RM830 per month. Single mothers, the disabled, and chronically ill patients are also entitled to receive this monthly aid but it is subject to terms and conditions. A family is usually given around RM100 to RM300 per month under this scheme.
Other findings from the AG report on this matter include:
- A single individual had received the same aid more than once.
- Some recipients whose monthly incomes are above the poverty line were reportedly given the aid.
- Some people who had shown proof of other people's identity card, claiming it as their own, were also given the monthly aid.
8. Two-thirds of the ministry offices in Malaysia do not follow proper management procedures
The AG report revealed that out of a surprise audit conducted at 265 government offices, only 72 of the offices were following proper official procedures. The remaining 193 (73%) of them have not been doing the same.
Some of the procedures these offices have failed to follow are the management of payment receipts and the recording of certain stock items, reported MMO.
The department heads had also reportedly failed to conduct frequent spot-checks to keep their staff in line.
Meanwhile, the audit conducted at 148 offices of statutory bodies revealed that 109 (74%) of them were not following main procedures.
9. Penang does not owe the federal government any money
According to FMT, Selangor owes the federal government the least amount of money at only RM14.67 million in arrears.
Contrary to that, Pahang owed the federal government the most amount of money compared to other states in Malaysia, at RM1.087 billion. This is followed by Kedah who owes the federal government RM1.028 billion in arrears.
The report stated that both states did not pay back the government RM4.23 billion in loans.
"The arrears in payment has increased by RM240 million, from RM3.99 billion in 2015 to RM4.23 billion last year," explained the report.
It was reported that most of the loan arrears are related to water supply, low-cost housing, and state economic development projects.
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